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Koskinen's Future at IRS Not Broached With Transition Team

Posted on December 14, 2016 by Hoffman, William

IRS Commissioner John Koskinen told Tax Analysts in an exclusive interview December 12 that he has already met with President-elect Donald Trump's transition team but did not discuss his future with the agency.

In a wide-ranging interview, Koskinen noted that he met with the president-elect's transition team for Treasury the week of December 5 and gave them a 20-minute overview of the agency. But at no time was his continuation as commissioner -- a subject of speculation in the tax community -- discussed. He said the transition team seemed more focused "on the agency, its challenges, and what it would take to allow it to improve its operations, its outreach to taxpayers."

In addition to discussing his future, Koskinen discussed his relationship with Trump, the failure of the recent House GOP efforts to impeach him, the state of online security in the approach to the 2016 tax return filing season, the future of the offshore voluntary disclosure program, and numerous other issues of tax administration. (Interview transcript.)

Koskinen said he met Trump years ago when he worked at the Palmieri Co. Palmieri -- for which Koskinen worked 21 years as vice president, president, chair, and CEO -- managed all non-rail assets of the Penn Central Transportation Co., which became one of the largest bankruptcies in U.S. history in 1970. One of Penn Central's properties was the Commodore Hotel, atop Grand Central Station in New York. Its ultimate buyer was Trump.

"So for several months, I negotiated with Mr. Trump the sale to him of the Commodore, which he subsequently then converted into the Grand Hyatt, which is still on top of Grand Central Station," Koskinen told Tax Analysts. "I got to know him well at that time."

Trump: 'Irrepressible but Energetic'

As a result, the commissioner was able to share some impressions of the man he'll soon call "boss."

"At that time [Trump] was 29 years old, so it's been that long ago," Koskinen said, speaking about the hotel deal struck with the now-president-elect. Trump "was irrepressible but energetic, hard-working. He impressed me because it was clear his father had been very successful as an apartment builder in Brooklyn, accumulated a reasonable amount of money.

"I knew a lot of people in that situation," Koskinen remembered. "Sons who became dilettantes or just kind of floated through. And it was clear that Donald was going to make a career for himself. He was anxious to build a company [with] operations on his own.

"And as I told my son once, after my son read [Trump's 1980s bestselling book] The Art of the Deal, you had to understand how hard he worked, how hard Trump worked," Koskinen said. "I mean, he didn't have a hobby. He worked all day and all night. He was energetic."

The IRS commissioner noted that he hasn't had any "transactions with him [but] I've kept in contact on occasion with him. I talked to him once or twice" in the last few years.

"He sent me a note that he'd been on a television interview program and had taken a lot of heat because he had said positive things about me," Koskinen recalled.

"Last time I talked to him was about 3-1/2 years ago," Koskinen said. "He called to congratulate me on my nomination" to become commissioner of the IRS, the IRS commissioner said.

No Defense for Impeachment

Turning to Congress's recent efforts to impeach him, Koskinen complained that he never got an opportunity to present his defense before the full House against allegations by some Republicans that he had not been fully cooperative and forthcoming. Koskinen has been hounded throughout his tenure by accusations that he obstructed House investigations of alleged IRS targeting of conservative organizations applying for tax-exempt status. He survived a December 6 attempt by some House Republicans to impeach him.

"There was an arrangement struck, that I went to a hearing in September where I had a five-minute opening statement and then I answered questions -- not exactly a full-scale impeachment defense," Koskinen said. "So I think one of the reasons that there was an overwhelming vote to not proceed with the impeachment vote was the large percentage of the House that felt that I had not been given a fair chance."

As to what happens in the 115th Congress, Koskinen said he had heard that some members felt the process had played out. "But that's a decision that Congress will make," he said.

More concerning, Koskinen said, was the impact of the impeachment proceedings on the future selection and role of a new IRS commissioner.

"I've talked to several members [of Congress] recently on the Hill about the fact that I was concerned less about myself -- as everybody knows, I came out of retirement, what are they going to do to me?" Koskinen said.

Koskinen said he was more concerned about the precedent that the impeachment could establish and whether it would discourage public service from other individuals "who had reputations that they prized." He added, "Most people care a lot about their reputation. If people can simply take allegations straight to the floor and move to impeachment, it [would] cause a lot of people to think twice."

The Tilt Toward Asia

The IRS is not contemplating unwinding or ending its offshore voluntary disclosure program, according to Koskinen.

"In fact," Koskinen told Tax Analysts, "I just had a conversation earlier today about how to expand and modify it and improve its operation."

The OVDP is credited with bringing in $10 billion in unpaid taxes, penalties, and interest from more than 100,000 taxpayers. Some worried the program might be curtailed or shut down as a way to encourage taxpayers to enroll before the opportunity slipped by, Koskinen said.

"The real incentive, though, is if we find out about you after we know you exist with the banks, then the penalties and the implications go up significantly," the IRS commissioner said. "There are other banks in the world, and other areas in the world than just Europe, and people who are maybe hiding money in other places ought to take advantage of that disclosure program, because we're coming."

After focusing its OVDP efforts on Europe, Koskinen said, the IRS is increasingly looking to "Hong Kong, Singapore, all of Asia, where a lot of people have engaged in the same kind of activities that they engaged in in Europe. So we have a lot of targets of opportunity out there."

Koskinen noted that he was told a year ago by staff that the IRS was being targeted by computer hackers about 1 million times per day. He said he rejected quoting that figure -- "it just sounds too big." So when he was told six months ago that the number of online attacks had escalated to 4 million per day, he said he felt more comfortable referencing the 1 million figure, "because it's a very conservative estimate."

"It is a serious problem," Koskinen added. With the IRS's antiquated computer systems -- some of which had been running since the Kennedy administration -- "nobody has a guarantee that everything they've got is going to work perfectly," he said. "We've got monitoring systems and state-of-the-art systems to repulse those attacks, but it is something we live with literally every day."

The Treasury Department has all its agencies working together now on security issues, Koskinen said, and the Department of Homeland Security is working on them with the IRS.

"We're not making trade-offs about security," Koskinen said, despite the fact that new multifactor authentication for online IRS services makes it harder for some taxpayers to access.

"We used to talk about balancing taxpayer inconvenience and security. I said, 'We can't talk about balancing that anymore. We cannot afford to have any security breaches,'" Koskinen said. "So we're not balancing anymore. We'll do whatever it takes to secure the data and protect taxpayers, to protect the systems."

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